M/s. Fabtech Manufacturing , Surat V. The ACIT, Circle -9, Surat

ITA 2135/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0132 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: G C PIPARA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2135/AHD/2013 / ASSTT. YEAR: 2009-2010 M/S.FABTECH MANUFACTURING PLOT NO.431/3, GIDC SACHIN ROAD, SURAT. PAN : AABFF 2794 D VS ITO, WARD - 2(2)(4) AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI G.C. PIPARA, AR REVENUE BY : MS.SONIA KUMAR, CIT - DR / DATE OF HEARING : 26/10/2016 / DATE OF PRONOUNCEMENT: 08/11/2016 $%/ O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-V, SURAT DATED 1.5.2013. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.2,62,520/- IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. IT EMERGES OUT FROM THE RECORD THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 19.9.2009 DECLARING TOTAL INCOME AT RS.35 ,35,180/-. ASSESSEE HAD MADE PAYMENT OF RS.8,49,577/- AS INTEREST TO FOUR E NTITIES VIZ. INDIA BULLS, KOTAK MAHINDRA, LUT FINANCE, BARCLAYS. IT FAILED T O DEDUCT THE TDS. THEREFORE, THE LD.AO HAS DISALLOWED THE CLAIM OF TH E ASSESSEE WITH REGARD TO ITA NO.2135/AHD/2013 2 THE INTEREST EXPENSES WITH THE AID OF SECTION 40(A) (IA) OF THE INCOME TAX ACT, 1961. SECTION 40(A)(IA) PROVIDES THAT IF THE ASSES SEE FAILS TO DEDUCT TDS WHILE MAKING PAYMENT OF INTEREST, COMMISSION, BROKERAGE E TC. THEN, ASSESSEE WILL NOT BE ENTITLED FOR DEDUCTION OF SUCH EXPENDITURE. AS FAR AS DISALLOWANCE OF INTEREST EXPENSES IS CONCERNED, THAT ISSUE HAS NOT BEEN DISPUTED. THE LD.AO HAS INITIATED PENALTY PROCEEDINGS FOR FURNISHING IN ACCURATE PARTICULARS OF ITS INCOME AS WELL AS FOR CONCEALMENT OF ITS INCOME. H E IMPOSED PENALTY OF RS.2,62,520/-. APPEAL TO THE LD.CIT(A) DID NOT BRI NG ANY RELIEF TO THE ASSESSEE. 4. WITH THE ASSISTANCE OF LD.REPRESENTATIVES, I HAV E GONE THROUGH THE RECORD. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARING ON THE CONTROVERSY, THEREFORE, IT IS NECESSARY TO TAKE NOTE OF IT. IT READS AS UNDER: '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE OF COURSE OF ANY PROCEE DINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B) ** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL N OT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULA RS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR ITA NO.2135/AHD/2013 3 (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OR SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 5. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SH OULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100 % TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OT HER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION-1 TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. ITA NO.2135/AHD/2013 4 UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANAT ION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 6. EXPLANATION OF THE ASSESSEE WAS THAT PAYEES ARE NON-BANKING FINANCIAL COMPANIES. THE ASSESSEE MISUNDERSTOOD POSITION OF LAW AND CONSTRUED THEM EQUIVALENT TO BANKING INSTITUTIONS. UNDER THIS MIS CONCEPTION OF FACT, IT DID NOT DEDUCT TDS. TO MY MIND, THIS EXPLANATION OF THE AS SESSEE IS A BONA FIDE ONE AND THE AO HAS NOT PROVED IT AS FALSE. IT IS ALSO PERTINENT TO NOTE THAT THE AO WAS NOT SURE WHETHER THE PENALTY IS TO BE IMPOSED F OR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE HAS ALLEGED BOTH THE CHARGES AGAINST THE ASSESSEE AND WHICH INCOME HAS B EEN CONCEALED HAS NOWHERE BEEN DEMONSTRATED BY THE AO. CONSIDERING OVERALL FACTS OF THE CASE, I AM OF THE VIEW THAT IT WAS DISALLOWANCE WIT H THE HELP OF SECTION 40(A)(IA) AND THE ASSESSEE FAILED TO DEDUCT TDS UND ER MISCONCEPTION OF FACTS, ITA NO.2135/AHD/2013 5 THEREFORE, IT SHOULD NOT BE VISITED WITH PENALTY. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND IMPUGNED PENALTY IS BEING D ELETED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 8 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 08/11/2016